Whenever I hear or read about the increasing number of bad things that are happening to the economy of this country—the decline in business and consumer confidence to historically low levels, the historic depreciation of the peso, the inflation rate’s rise to historic levels, the movement of the basic BSP (Bangko Sentral ng Pilipinas) interest rate to historic highs, etc.—I am reminded of an acronym that was created by the US military early during World War II.
The acronym is Snafu. I stands for “situation normal all fouled up (I appreciate that, considering contemporary lingo, “fouled” is usually replaced by another six-letter word beginning with F and with a K in the middle). Snafu was used most frequently by the logistics personnel of the US military, whose responsibility it was to provide the means for moving millions of troops and tens of millions of war materiel—possessions, weaponry, ammunition and equipment of all kinds—access to the continents in support of America’s war effort. But the use of the acronym was not confined to the logistics folk: the US military’s officialdom in time began to use Snafu to describe situations resulting from the inefficiencies and operational shortcomings of their staff. Snafu may not yet have been admitted into Webster’s Dictionary, but it assuredly has become a part of the US military’s lexicon.
Why am I reminded of Snafu at this juncture in the Philippine economy’s journey toward economic maturity? Because before it was fouled up, this country’s economic situation was characterized as normal.
Consider the national economic picture on July 1, 2016, the start of President Rodrigo Duterte’s term of office. On that day, the nation’s economic managers—both the outgoing and the incoming team—could speak comfortably about the “sound macro-economic fundamentals” of the Philippine economy. With the exception of the merchandise trade component of the BOP (balance of payments), the fundamentals all were positive and upward-moving. The GDP (gross domestic product) was within the 6-to-8 percent annual growth rate projected by the economic managers—6.8 percent in the succeeding quarters—inflation likewise was within BSP’s 2-to-4 percent target annual rate, the GIR (gross international reserves) was rising steadily, the budget deficit maintained a sound ratio to GDP and the confidence levels of consumers and the business community were high. The ratified with its macro-economic condition, the three international credit rating agencies—Moody’s, Standard and Poor’s and Fitch—maintained their investment-grade ratings for the Philippines.
In sum, this country’s economic situation on July 1, 2016 could be characterized as normal. Enter Part 1 of the TRAIN (Tax Reform and Inclusion) program bull in a China shop, within weeks of its approval a normal situation into an all-fouled up situation. As a result of the higher costs of manufacturing, transportation and electricity generation caused by the increases in fuel excise taxes, the inflation rate began to rise, reaching a nine-year-high 6.4 percent in August. Alarmed and pressured by the steady rise in consumer prices—with all of its implication for social and political stability—the BSP enacted three successive increases in its basic interest rates, including a rare 50-basic points increase, between May and August. The BOP (balance of payments), weighed down by a yawning merchandise trade imbalance, neared the $1.3 billion mark at end—July, in the process aggravating a peso-depreciation problem. The peso is now one of the worst-performing currencies in the East-Asia Pacific region, and its resulting slide has caused consumer prices to rise even further. Reflecting the disturbed economic environment, GDP growth decreased from 6.8 percent in the first quarter to 6 percent in the April-to-June period.
There we have it. On the day that he Rodrigo Duterte and his economic managers took assumed their offices, the situation of the Philippine economy was normal. Today, almost twenty-seven months later, the Philippine economy is all fouled—the other six-letter verb with a K in it would probably be more appropriate—up.
A perfect Snafu case.